ninth edition

STEPHEN P. ROBBINS MARY COULTER

Chapter
Operations and Value
19 Chain Management

2007 Prentice Hall, Inc. PowerPoint Presentation by Charlie Cook

All rights reserved. The University of West Alabama
 LEARNING OUTLINE
Follow this Learning Outline as you read and study this chapter.

What Is Operations Management and Why Is It

Important?
Explain what operations management is.
Contrast manufacturing and services organizations.
Describe managers role in improving productivity.
Discuss the strategic role of operations management.
Value Chain Management
Define value chain and value chain management.
Describe the goal of value chain management.
Discuss the requirements for successful value chain
management.

2007 Prentice Hall, Inc. All rights reserved. 192

 L E A R N I N G O U T L I N E (contd)
Follow this Learning Outline as you read and study this chapter.

Value Chain Management (contd)

Describe the benefits that result from value chain
management.
Explain the obstacles to value chain management.
Current Issues in Operations Management
Discuss technologys role in manufacturing.
Tell some of the various quality dimensions.
Explain ISO 9000 and Six Sigma.
Describe mass customization and how operations
management contributes to it.

2007 Prentice Hall, Inc. All rights reserved. 193

 What Is Operations Management?
Operations Management
The design, operation, and control of the
transformation process that converts such resources
as labor and raw materials into goods and services
that are sold to customers.
The Importance of Operations Management
It encompasses both services and manufacturing.
It is important in effectively and efficiently managing
productivity.
It plays a strategic role in an organizations
competitive success.

2007 Prentice Hall, Inc. All rights reserved. 194

 Exhibit 191 The Operations System

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 Manufacturing and Services
Manufacturing Organizations
Use operations management in the transformation
process of turning raw materials into physical goods.
Service Organizations
Use operations management in creating nonphysical
outputs in the form of services (the activities of
employees interacting with customers).

2007 Prentice Hall, Inc. All rights reserved. 196

 Managing Productivity
Productivity
The overall output of goods or services produced
divided by the inputs needed to generate that output.
A composite of people and operations variables.

Benefits of Increased Productivity

Economic growth and development
Higher wages and profits without inflation
Increased competitive capability due to lower costs

2007 Prentice Hall, Inc. All rights reserved. 197

 Exhibit 192 Demings 14 Points for Improving Productivity

Plan for the long-term future. Raise the quality of your line
Never be complacent concerning the supervisors.
quality of your product. Drive out fear.
Establish statistical control over Encourage departments to work
your production processes and closely together rather than to
require your suppliers to do so as concentrate on departmental or
well. divisional distinctions.
Deal with the best and fewest Do not adopt strictly numerical
number of suppliers. goals.
Find out whether your problems are Require your workers to do quality
confined to particular parts of the work.
production process or stem from the Train your employees to understand
overall process itself. statistical methods.
Train workers for the job that you Train your employees in new skills
are asking them to perform. as the need arises.
Make top managers responsible for
implementing these principles.
Source: W.E. Deming, Improvement of Quality and Productivity Through
Action by Management, National Productivity Review, Winter 19811982,
pp. 1222. With permission. Copyright 1981 by Executive Enterprises, Inc.,
22 West 21st St., New York, NY 10010-6904. All rights reserved.
2007 Prentice Hall, Inc. All rights reserved. 198
 Strategic Role of
Operations Management
The era of modern manufacturing began in the U.S over
100 years ago.
After WWII, U.S. manufacturers focused on functional
areas other than manufacturing.
By the 1970s, foreign competitors integrated
manufacturing technologies were producing quality
goods at lower costs.
U.S manufacturers responded by investing in updated
technology, restructuring organizations, and including
production requirements in their strategic planning.

2007 Prentice Hall, Inc. All rights reserved. 199

 Value Chain Management
Value
The performance characteristics, features and
attributes, and any other aspects of goods and
services for which customers are willing to give up
resources (i.e., spend money).
The Value Chain
The entire series of organizational work activities that
add value at each step beginning with the processing
of raw materials and ending with the finished product
in the hands of end users.

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 Value Chain Management (contd)
What is Value Chain Management?
The process of managing the entire sequence of
integrated activities and information about product
flows along the entire value chain.
Goal of Value Chain Management
To create a value chain strategy that fully integrates
all members into a seamless chain that meets and
exceeds customers needs and creates the highest
value for the customer.

2007 Prentice Hall, Inc. All rights reserved. 1911

 Exhibit 193 Six Requirements for Successful Value Chain Management

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 Value Chain Management (contd)
Requirements for Value Chain Management
A new business model incorporating:
Coordination and collaboration
Investment in information technology
Changes in organizational processes
Committed leadership
Flexible jobs and adaptable, capable employees
A supportive organizational culture and attitudes

2007 Prentice Hall, Inc. All rights reserved. 1913

 Benefits of Value Chain Management

Improved Improved
Procurement Logistics

Benefits of
Value Change
Management

Enhanced Improved
Customer Order Product
Management Development

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 Exhibit 194 Obstacles to Successful Value Chain Management

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 Value Chain Management (contd)
Obstacles to Value Chain Management
Organizational barriers
Refusal or reluctance to share information
Reluctance to shake up the status quo
Security issues

Cultural attitudes
Lack of trust and too much trust
Fear of loss of decision-making power

Required capabilities
Lacking or failing to develop the requisite value chain
management skills

2007 Prentice Hall, Inc. All rights reserved. 1916

 Value Chain Management (contd)
Obstacles to Value Chain Management (contd)
People
Lacking commitment to do whatever it takes
Refusing to be flexible in meeting the demands of a changing
situation
Not being motivated to perform at a high level
Lack of trained managers to lead value chain initiatives

2007 Prentice Hall, Inc. All rights reserved. 1917

 Current Operations Management Issues
Technologys Role in Manufacturing
Increased automation and integration of production
facilities with business systems to control costs.
Predictive maintenance, remote diagnostics, and utility cost
savings
The Concept of Quality
The ability of a product or service to reliably do what
its supposed to do and to satisfy customer
expectations.

2007 Prentice Hall, Inc. All rights reserved. 1918

 Current Issues (contd)
Quality Initiatives
Planning for quality
Organizing and leading for quality
Controlling for quality

Quality Goals
ISO 9000 certification
Six Sigma standards

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 Exhibit 195 Product Quality Dimensions

1. PerformanceOperating characteristics
2. FeaturesImportant special characteristics
3. FlexibilityMeeting operating specifications over some period
of time
4. DurabilityAmount of use before performance deteriorates
5. ConformanceMatch with preestablished standards
6. ServiceabilityEase and speed of repair or normal service
7. AestheticsHow a product looks and feels
8. Perceived qualitySubjective assessment of characteristics
(product image)

Sources: Adapted from J.W. Dean, Jr., and J.R. Evans, Total Quality: Management, Organization and Society (St. Paul, MN:
West Publishing Company, 1994); H.V. Roberts and B.F. Sergesketter, Quality is Personal (New York: The Free Press,
1993): D. Garvin, Managed Quality: The Strategic and Competitive Edge (New York: The Free Press, 1988); and M.A. Hitt,
R.D. Ireland, and R.E. Hoskisson, Strategic Management, 4th ed. (Cincinnati, OH: SouthWestern, 2001), p. 211.
2007 Prentice Hall, Inc. All rights reserved. 1920
 Exhibit 195 (contd) Service Quality Dimensions

1. TimelinessPerformed in promised period of time

2. CourtesyPerformed cheerfully
3. ConsistencyGiving all customers similar experiences each
time
4. ConvenienceAccessibility to customers
5. CompletenessFully serviced, as required
6. AccuracyPerformed correctly each time

Sources: Adapted from J.W. Dean, Jr., and J.R. Evans, Total Quality: Management, Organization and Society (St. Paul, MN:
West Publishing Company, 1994); H.V. Roberts and B.F. Sergesketter, Quality is Personal (New York: The Free Press,
1993): D. Garvin, Managed Quality: The Strategic and Competitive Edge (New York: The Free Press, 1988); and M.A. Hitt,
R.D. Ireland, and R.E. Hoskisson, Strategic Management, 4th ed. (Cincinnati, OH: SouthWestern, 2001), p. 211.
2007 Prentice Hall, Inc. All rights reserved. 1921
 Current Issues (contd)
Mass Customization
Is a design-to-order concept that provides consumers
with a product when, where, and how they want it.
Makes heavy use of technology (flexible
manufacturing techniques) and engages in a
continual dialogue with customers.
Benefits of Mass Customization
Creates an important relationship between the firm
and the customer in providing loyalty-building value to
the customer and in garnering valuable market
information for the firm.

2007 Prentice Hall, Inc. All rights reserved. 1922

 Terms to Know
operations management
manufacturing
organizations
service organizations
productivity
value
value chain
value chain management
organizational processes
intellectual property
quality
ISO 9000
Six Sigma
mass customization
2007 Prentice Hall, Inc. All rights reserved. 1923